Market spotlight: Germany

George Sell George Sell Uploaded

• How is the German serviced apartment market performing?
"The market is performing very well. Compared with 2016 we have seen a 22 per cent increase in the number of units, to around 32,600 units in Germany. As the segment is growing we can see even more diversity of concepts. Micro apartments for example are a huge trend in Germany at the moment."

• What are the reasons for this growth?
"On the demand side we see that serviced apartments are just hitting the megatrends (individuality, new work and urbanism) as well as the needs of today's business travellers. They offer more independence and individuality than a hotel and more facilities than a normal flat. For investors and project developers serviced apartments are a great investment product as the yield is way more attractive compared to, for example, regular housing. Especially in cities where the land prices are very high, serviced apartments can be a good investment."

• How would you summarise investor sentiment?
"It feels like there is kind of a gold-rush mood among the investors at the moment. Many investors show a great interest in serviced apartments."

• What is the German serviced apartment development pipeline? And is there a stand out product offering fuelling this growth?
"By 2019 the market will grow by at least 40 per cent, and 13,000 units. Those numbers only reflect the officially announced projects so we expect an even bigger growth. Within all product types we are seeing an increase of units in the future, but within the micro apartment products I expect the greatest relative growth. At the moment micro apartments only make up four per cent of all serviced apartment products but as they are a big trend right now and there are several large projects in the pipeline the market share will rise."
• Why is Munich outperforming the market and what are the main characteristics for this growth?
"Well, there are several reasons but the main one is its economic structure and its tight residential market. Munich is very strong in service and producing industries and has a strong international business relevance - its economy is still growing. Those factors generate a lot of short- and especially long-term business travel and also make it attractive for people to move to Munich. Expatriates as well as those new to the city have a hard time finding a flat on the regular residential market so serviced apartments are often a great alternative. For business travellers and tourists that stay for less than a month but longer than a week serviced apartments can be a more individual and cheaper option than a hotel."
• Have you seen any changes in leisure and/or corporate travel buying patterns/behaviour, and if so what?
"With our platform we have recognised that many requests are coming in last minute. While in the past we had several weeks to find a suitable apartment it's now only days, and often it's even just one or two days. Also the expectations of the accommodations are higher no matter what the budget is. Our latest market report shows that serviced apartments are demanded constantly by 70 per cent of business travellers."

• With the growth in OTA bookings, particularly for the leisure guest, how relevant are serviced apartment brands in Germany?
"Branding is a big thing in Germany at the moment but this is not primarily due to the growth in OTA bookings. Branding has become more relevant because the market is growing and apartment suppliers need to sharpen their product profile to be more compatible. I think branding is the result of the professionalisation of the serviced apartment segment in Germany."

• Is Airbnb's product offering a positive or negative for the serviced apartment sector?
"Both. What's positive is that Airbnb draws attention to the temporary living segment and through this also makes serviced apartments more popular. On the other hand Airbnb, especially Airbnb for Business is competition for the serviced apartment market and its specialised platforms and agencies."

• What are the main challenges the German, and broader European serviced apartment market will face over the next two to three years?
"With the raising numbers of properties and the segmentation of products in Germany, having a clear and understandable wording becomes more important than ever. If providers keep using terms like aparthotel, residential housing, suite hotel, boarding house and so forth like they want to, the guests, lenders and investors will never understand the characteristics of the products and they will also not know what differentiates corporate housing from regular housing and apartment hotels from regular hotels."

"Another thing the serviced apartment industry needs to work on is benchmarking. At the moment only apartment hotels understand the need of reporting. This makes it hard for lenders to evaluate and finance cooperate housing or any other serviced apartment product apart from apartment hotels."

"For suppliers and agencies a great challenge will remain the online bookability. Even though we now have the tech base to provide instant booking for long stays, connecting those engines to several interfaces is a challenging task. Especially for agencies it is also difficult to get availability online, as the market is very healthy and has a great occupancy rate of 77 per cent."


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